Accounting is the process of organizing, analyzing, and communicating financial information that is used for decision-making.
Accounting is often called the “language of business.”
Financial accounting measures performance using financial reports and communicates results to those outside of the organization who may have an interest in the company’s performance, such as investors and creditors.
Managerial accounting uses both financial and nonfinancial information to aid in decision-making.
Stakeholders are persons or groups that rely on financial information to make decisions.
Stakeholders include stockholders, creditors, governmental and regulatory agencies, customers, and managers and other employees.
Stockholders are owners of a business.
Publicly traded companies sell stock (ownership) to the general public.
Privately held companies offer stock to employees or to select individuals or groups outside the organization.
Creditors sometimes grant extended payment terms to other businesses, normally for short periods of time, such as thirty to forty-five days.
Lenders are banks and other institutions that have a primary purpose of lending money for long periods of time.
Businesses generally have three ways to raise capital (money): profitable operations, selling ownership (called equity financing), and borrowing from lenders (called debt financing).
In business, profit means the inflows of resources are greater than the outflows of resources.
Publicly traded companies are required to file with the Securities and Exchange Commission (SEC), a federal government agency charged with protecting the investing public.
Guidelines for the accounting profession are called accounting standards or generally accepted accounting principles (GAAP).
The Securities and Exchange Commission (SEC) is responsible for establishing accounting standards for companies whose stocks are traded publicly on a national or regional stock exchange, such as the New York Stock Exchange (NYSE).
Governmental and regulatory agencies at the federal, state, and local levels use financial information to accomplish the mission of protecting the public interest.
Customers, employees, and the local community benefit when businesses are financially successful.
It is important for accountants to be well versed in written and verbal communication and possess other nonaccounting skill sets.
A bachelor’s degree is typically required for entry-level work in the accounting profession.
Advanced degrees and/or professional certifications are beneficial for advancement within the accounting profession.
Career paths within the accounting profession include auditing, taxation, financial accounting, consulting, accounting information systems, cost and managerial accounting, financial planning, and entrepreneurship.
Internal control systems help ensure the company’s goals are being met and company assets are protected.
Internal auditors work inside business and evaluate the effectiveness of internal control systems.
Accountants help ensure the taxes are paid properly and in a timely manner.
Accountants prepare financial statements that are used by decision makers inside and outside of the organization.
Accountants can advise managers and other decision makers.
Accountants are often an integral part of managing a company’s computerized accounting and information system.
Cost accounting determines the costs involved with providing goods and services.
Managerial accounting incorporates financial and nonfinancial information to make decisions for a business.
Training in accounting is helpful for financial planning services for businesses and individuals.
Accounting helps entrepreneurs understand the financial implications of their business.
Accountants have opportunities to work for many types of organizations, including public accounting firms, corporations, governmental entities, and not-for-profit entities.
Professional certifications offer many benefits to those in the accounting and related professions.
Common professional certifications include Certified Public Accountant (CPA), Certified Management Accountant (CMA), Certified Internal Auditor (CIA), Certified Fraud Examiner (CFE), Chartered Financial Analyst (CFA), and Certified Financial Planner (CFP).